POWER BALANCE IS SHIFTING IN FAVOR OF BUYERS.

• Prices are dropping at the fastest rate in 5 years.
•          Existing-home sales fell for the twelfth straight month in January, with year-over-year sales falling 37%, the biggest decline since 2010.
•          Seattle posted the second-highest decrease in close-to-list price ratio of any metro area in the U.S. last month.
•          Sellers are paying for rate buy-downs.
•          Sellers are offering concessions.
•          Inspection and other key contingencies are back in play.
•          Many buyers are negotiating a combination of (Lower offering price, Seller Rate Buy-Downs, AND still including Inspection and other contingencies)

The housing market today remains in a hazy no man’s land, with neither buyer nor seller willing to surrender what little control they have.

If you’re considering selling your home, it’s critical to understand the current real estate market dynamics. The volatility that dominated the market in recent years amid pandemic-related pressures is starting to ease, but that doesn’t mean there aren’t still challenges. Existing-home sales fell for the twelfth straight month in January, with year-over-year sales falling 37%, the biggest decline since 2010.

Buyers face the dual enemies of high home prices and mortgage rates, which are ticking upward again after a brief decline and are once again hovering near the 7 percent mark (as of late February). according to Freddie Mac.

That reality is making mortgage payments increasingly expensive and driving more than a few potential buyers to the sidelines — certainly not ideal if you’re on the selling side of the equation.

Sellers bear their own hardships: a glut of competition. As buyers sit on the sidelines, homes for sale linger on the market, gathering dust and dashing sellers’ hopes of bidding wars and over-asking offers.

But there is some inkling of a power shift in the buyers vs. seller’s battle, and it’s in favor of the team willing to take some action: Buyers.

“Perhaps surprisingly, data suggests that many shoppers are still finding success in this challenging market, with the homeownership rate notching its highest fourth-quarter reading in over a decade of 65.9%,” says Realtor.com® Economist Jiayi Xu in her analysis of housing data for the week ending Feb. 18.

Why homebuyers might have the upper hand.

Buyers who can make it past the market’s affordability challenges can exploit what positives they have on their side—namely, homes galore.

Indeed, the number of homes for sale for the week ending Feb. 18 is notably higher, up 67% from one year ago. And that’s mainly because listings are sitting on the market longer.

And as we head into the traditional “Spring” housing market we are expecting more homes to be listed bringing to bare the age-old adage “Supply and Demand”. Total housing inventory at the end of January was up 2.1% from December and 15.3% from one year ago.

Adding more inventory to a market with higher inventory than last year coupled with rates hovering around 7% is a perfect recipe for further price drops.

Seattle posted the second-highest decrease in close-to-list price ratio of any metro area in the U.S. last month, according to new data from RE/MAX.The close-to-list price ratio decreased by 6.9 percentage points year-over-year to 97.6% in January 2023.

“The market’s abrupt adjustments over the last year have made it harder for all participants to determine their own boundaries, let alone figure out how to meet in the middle so that a transaction can take place,” says Realtor.com® Chief Economist Danielle Hale in her analysis of housing data for the week ending Feb.11.

But amid the backdrop of soaring inventory and still-high home prices, another data point suggests some sellers might be finally willing to change up their strategy.

The latest data for Sammamish, WA shows that the share of home sellers making a price reduction was more than twice as large as one year ago. Indeed, 50% of sellers in have slashed their prices compared with only 6% a year earlier.

If you are considering selling NOW is the time!

Sellers are likely pricing their homes lower in an attempt to stand out from the crowded marketplace.

And those softening prices spell an opportunity for buyers, who can use their power position to negotiate with desperate sellers for an even better home price to offset high mortgage rates.

“The balance is shifting toward those who are actively shopping,” says Xu.

Yet one downside for house hunters is that, while they have plenty of listings to peruse, many of them are stale, meaning they’ve been lingering online for months. As such, many buyers might have already picked over and passed on these clunkers already.

A bright spot for home sellers

Although homeowners are less interested in selling than they were a year ago, there is a light at the end of the tunnel.

Homes spent 24 extra days on the market compared with a year earlier, marking 29 weeks that homes have been for sale longer. At first blush, this might seem like bad news for weary sellers. Yet it indicates that the market is course-correcting, which will ultimately be good for sellers and buyers alike.

“A slower market pace is really a return to what was normal before the [COVID-19] pandemic turned a long-term housing under-supply into scarcity on steroids,” says Xu.

“January sales data shows a continued decline in sales of existing homes, but at a slower pace,” says Xu. “While sales aren’t returning to pre-pandemic levels anytime soon, there are reasons to suspect that the worst of the downturn may be in the past.”

Related Links:

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Housing Market Seeing "Favorable Spike" in Activity Tied to Declining Morgage Rates

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